8.You estimate that the risk-free rate of return is 7.2% and the expected return on...
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8.You estimate that the risk-free rate of return is 7.2% and the expected return on the market portfolio is 16.3%. Use the CAPM to calculate the expected returns on Stocks 1 through 4 based on the information in the a. table below b. Draw a graph of the SML c. Show the positions of each of the assets relative to the SMI d. Indicate whether each asset is underpriced, overpriced, or correctly priced and calculate by how much. Stock Stock Stock Stock -0.2 0.74 1.53 2.46 7.48% 10.19% 31.30% 29.59% 2 3 4 , CAPM E(.) Actual E(r) Fairly Priced? Amount of mispricing
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